S T A T E   O F   N E W   Y O R K
 ________________________________________________________________________
 
                                   3398
 
                        2021-2022 Regular Sessions
 
                             I N  S E N A T E
 
                             January 29, 2021
                                ___________
 
 Introduced by Sens. BAILEY, SEPULVEDA -- read twice and ordered printed,
   and  when  printed  to  be  committed  to  the  Committee  on Housing,
   Construction and Community Development
 
 AN ACT to amend the administrative code of the city  of  New  York,  the
   emergency tenant protection act of nineteen seventy-four and the emer-
   gency housing rent control law, in relation to approving major capital
   improvement rent increases and extending the length of time over which
   major capital improvement expenses may be recovered
 
   THE  PEOPLE OF THE STATE OF NEW YORK, REPRESENTED IN SENATE AND ASSEM-
 BLY, DO ENACT AS FOLLOWS:
 
   Section 1. Subparagraph (g) of paragraph 1 of subdivision g of section
 26-405 of the administrative code of the city of New York, as amended by
 section 27 of part Q of chapter 39 of the laws of 2019,  is  amended  to
 read as follows:
   (g) (I) COLLECTION OF SURCHARGES TO THE MAXIMUM RENT AUTHORIZED PURSU-
 ANT  TO  ITEM  (II)  OF THIS SUBPARAGRAPH SHALL CEASE WHEN THE OWNER HAS
 RECOVERED THE COST OF THE MAJOR CAPITAL IMPROVEMENT;
   (II) There has been since July  first,  nineteen  hundred  seventy,  a
 major  capital  improvement [essential for the preservation energy effi-
 ciency,  functionality,  or  infrastructure  of  the  entire   building,
 improvement  of  the  structure including heating, windows, plumbing and
 roofing but shall not be for operational costs or  unnecessary  cosmetic
 improvements. The temporary increase based upon a major capital improve-
 ment  under  this  subparagraph for any order of the commissioner issued
 after the effective date of the chapter of  the  laws  of  two  thousand
 nineteen that amended this subparagraph shall be in an amount sufficient
 to  amortize  the cost of the improvements pursuant to this subparagraph
 (g) over a twelve-year period for buildings with  thirty-five  or  fewer
 units  or a twelve and one-half year period for buildings with more than
 thirty-five units, and shall be removed from the  legal  regulated  rent
 thirty  years  from  the date the increase became effective inclusive of

  EXPLANATION--Matter in ITALICS (underscored) is new; matter in brackets
                       [ ] is old law to be omitted.
              

                                                            LBD07622-01-1

 S. 3398                             2

 any increases granted by the applicable rent guidelines board. Temporary
 major capital improvement increases shall be  collectible  prospectively
 on  the  first day of the first month beginning sixty days from the date
 of  mailing notice of approval to the tenant. Such notice shall disclose
 the total monthly increase in rent and the  first  month  in  which  the
 tenant  would be required to pay the temporary increase. An approval for
 a temporary major capital improvement increase shall not include  retro-
 active  payments.  The  collection  of any increase shall not exceed two
 percent in any year from the effective date of the  order  granting  the
 increase  over  the  rent set forth in the schedule of gross rents, with
 collectability of any dollar excess above said sum to be spread  forward
 in  similar  increments  and  added to the rent as established or set in
 future years.  Upon vacancy, the landlord may add any remaining  balance
 of  the  temporary major capital improvement increase to the legal regu-
 lated rent. Notwithstanding any other provision  of  the  law,  for  any
 renewal  lease  commencing  on or after June 14, 2019, the collection of
 any rent increases due to any major capital improvements approved on  or
 after  June  16,  2012  and  before  June  16, 2019 shall not exceed two
 percent in any year for any tenant in occupancy on the  date  the  major
 capital improvement was approved,]; PROVIDED THAT THE COMMISSIONER FIRST
 FINDS  THAT  SUCH IMPROVEMENTS ARE DEEMED DEPRECIABLE UNDER THE INTERNAL
 REVENUE CODE AND SUCH IMPROVEMENTS ARE REQUIRED  FOR  THE  OPERATION  OR
 PRESERVATION  OF  THE  STRUCTURE.  HOWEVER, NO MAJOR CAPITAL IMPROVEMENT
 RENT INCREASE WILL BE APPROVED BY THE DIVISION OF HOUSING AND  COMMUNITY
 RENEWAL  UNLESS  THE  WORK  PERFORMED  IS AN ENHANCEMENT OR UPGRADE TO A
 HOUSING ACCOMMODATION OR SERVICE THEREIN; OR  IS  AN  ADDITION  TO  SUCH
 HOUSING  ACCOMMODATION AND OTHERWISE ELIGIBLE ACCORDING TO THE PREREQUI-
 SITES FOR MAJOR  CAPITAL  IMPROVEMENT  RENT  INCREASES.  ANY  REPAIR  OR
 REPLACEMENT INTENDED TO MAINTAIN AN EXISTING SERVICE SHALL NOT BE ELIGI-
 BLE  FOR A MAJOR CAPITAL IMPROVEMENT RENT INCREASE. NO APPLICATION FOR A
 MAJOR CAPITAL IMPROVEMENT RENT INCREASE MAY BE APPROVED IF  THERE  EXIST
 ANY  OUTSTANDING   HAZARDOUS VIOLATIONS AT THE TIME OF THE CONSIDERATION
 OF SUCH APPLICATION, AS DETERMINED PURSUANT TO REGULATIONS OF THE  DIVI-
 SION  OF  HOUSING  AND COMMUNITY RENEWAL OR ANY AGENCY ADMINISTERING AND
 ENFORCING A BUILDING CODE IN THE JURISDICTION IN WHICH THE  PROPERTY  IS
 LOCATED, UNLESS IT IS DETERMINED BY THE DIVISION OF HOUSING AND COMMUNI-
 TY  RENEWAL  THAT  SUCH  WORK  IS  ESSENTIAL  TO  THE ALLEVIATION OF THE
 VIOLATIONS AND SUCH APPROVAL IS CONSISTENT WITH THE PROVISIONS  OF  THIS
 SECTION. EXCEPT IN THE CASE OF EMERGENCY OR GOOD CAUSE, THE OWNER OF THE
 PROPERTY  SHALL  FILE, NOT LESS THAN THIRTY DAYS BEFORE THE COMMENCEMENT
 OF THE IMPROVEMENT, WITH THE DIVISION OF HOUSING AND COMMUNITY   RENEWAL
 A STATEMENT CONTAINING INFORMATION OUTLINING THE SCOPE OF WORK, EXPECTED
 DATE  OF  COMPLETION  FOR  SUCH  WORK AND AN AFFIDAVIT SETTING FORTH THE
 FOLLOWING INFORMATION: (A) EVERY OWNER OF RECORD AND OWNER OF A SUBSTAN-
 TIAL INTEREST IN THE PROPERTY OR ENTITY OWNING THE PROPERTY OR  SPONSOR-
 ING  THE  IMPROVEMENT;  AND    (B) A STATEMENT THAT NONE OF SUCH PERSONS
 HAD, WITHIN THE FIVE YEARS PRIOR TO THE IMPROVEMENT, BEEN FOUND TO  HAVE
 HARASSED OR UNLAWFULLY EVICTED TENANTS BY JUDGMENT OR DETERMINATION OF A
 COURT  OR  AGENCY UNDER THE PENAL LAW, ANY STATE OR LOCAL LAW REGULATING
 RENTS OR ANY STATE OR LOCAL LAW RELATING TO  HARASSMENT  OF  TENANTS  OR
 UNLAWFUL  EVICTION.  UPON  RECEIPT  OF  THE  SCOPE OF WORK AND AFFIDAVIT
 PROVIDED FOR HEREIN, THE DIVISION OF HOUSING AND COMMUNITY RENEWAL SHALL
 PROVIDE THE TENANTS IN OCCUPANCY IN SUCH BUILDINGS  WITH  SUCH  INFORMA-
 TION.  THE DIVISION OF HOUSING AND COMMUNITY RENEWAL SHALL, IN ADDITION,
 IMPLEMENT PROCEDURES INCLUDING, BUT NOT  LIMITED  TO,  ELICITING  TENANT
 COMMENTS  TO  DETERMINE WHETHER MAJOR CAPITAL IMPROVEMENT REHABILITATION

 S. 3398                             3
 
 WORK HAS BEEN SATISFACTORILY COMPLETED.  NO  MAJOR  CAPITAL  IMPROVEMENT
 RENT  INCREASE  SHALL  BECOME EFFECTIVE UNTIL ANY DEFECTIVE OR DEFICIENT
 REHABILITATION WORK HAS BEEN CURED.  THE  INCREASE  PERMITTED  FOR  SUCH
 CAPITAL  IMPROVEMENT  SHALL  BE  COLLECTED AS A MONTHLY SURCHARGE TO THE
 MAXIMUM RENT. IT SHALL BE SEPARATELY DESIGNATED AND BILLED AS  SUCH  AND
 SHALL NOT BE COMPOUNDED BY ANY OTHER ADJUSTMENT TO THE MAXIMUM RENT. THE
 SURCHARGE  ALLOCABLE  TO  EACH APARTMENT SHALL BE AN AMOUNT EQUAL TO THE
 COST OF THE IMPROVEMENT DIVIDED BY EIGHTY-FOUR, DIVIDED BY THE NUMBER OF
 ROOMS IN THE BUILDING, AND THEN MULTIPLIED BY THE  NUMBER  OF  ROOMS  IN
 SUCH  APARTMENT;  PROVIDED THAT THE SURCHARGE ALLOCABLE TO ANY APARTMENT
 IN ANY ONE YEAR MAY NOT EXCEED AN AMOUNT EQUAL TO  SIX  PERCENT  OF  THE
 MONTHLY  RENT  COLLECTED BY THE OWNER FOR SUCH APARTMENT AS SET FORTH IN
 THE SCHEDULE OF GROSS RENTS. ANY EXCESS ABOVE SAID SIX PERCENT SHALL  BE
 CARRIED FORWARD AND COLLECTED IN FUTURE YEARS AS A FURTHER SURCHARGE NOT
 TO  EXCEED  AN  ADDITIONAL  SIX PERCENT IN ANY ONE YEAR PERIOD UNTIL THE
 TOTAL SURCHARGE EQUALS THE AMOUNT IT WOULD HAVE BEEN  IF  THE  AFOREMEN-
 TIONED SIX PERCENT LIMITATION DID NOT APPLY; or
   §  2.  Subparagraph  (k)  of  paragraph  1 of subdivision g of section
 26-405 of the administrative code of the city of New York, as amended by
 chapter 749 of the laws of 1990, is amended to read as follows:
   (k) The landlord has incurred, since January first,  nineteen  hundred
 seventy,  in connection with and in addition to a concurrent major capi-
 tal improvement pursuant to subparagraph (g) of  this  paragraph,  other
 expenditures  to  improve, restore or preserve the quality of the struc-
 ture. An adjustment under this subparagraph shall  be  granted  only  if
 such  improvements  represent  an  expenditure equal to at least ten per
 centum of the total operating and maintenance expenses for the preceding
 year. An adjustment under this subparagraph shall be in addition to  any
 adjustment  granted  for  the  concurrent  major capital improvement and
 shall be [in an amount sufficient to amortize the cost of  the  improve-
 ments  pursuant  to  this  subparagraph over a seven-year period] IMPLE-
 MENTED IN THE SAME MANNER AS SUCH MAJOR CAPITAL IMPROVEMENT AS A FURTHER
 SURCHARGE TO THE MAXIMUM RENT.
   § 3. Paragraph 6 of subdivision c of section 26-511 of the administra-
 tive code of the city of New York, as separately amended by  section  12
 of  part  K  of chapter 36 and section 28 of part Q of chapter 39 of the
 laws of 2019, is amended to read as follows:
   (6) provides criteria whereby the commissioner may act  upon  applica-
 tions  by  owners  for  increases  in  excess  of the level of fair rent
 increase established under this law provided, however, that such  crite-
 ria  shall  provide  [(a)  as] IN REGARD to hardship applications, for a
 finding that the level of fair rent increase is not sufficient to enable
 the owner to maintain approximately the same average annual  net  income
 (which shall be computed without regard to debt service, financing costs
 or  management  fees)  for the three year period ending on or within six
 months of the date of  an  application  pursuant  to  such  criteria  as
 compared with annual net income, which prevailed on the average over the
 period nineteen hundred sixty-eight through nineteen hundred seventy, or
 for  the  first  three  years of operation if the building was completed
 since nineteen hundred sixty-eight or for the first three  fiscal  years
 after  a  transfer  of  title  to a new owner provided the new owner can
 establish to the  satisfaction  of  the  commissioner  that  he  or  she
 acquired  title  to  the building as a result of a bona fide sale of the
 entire building and that the new owner is  unable  to  obtain  requisite
 records  for the fiscal years nineteen hundred sixty-eight through nine-
 teen hundred seventy despite diligent efforts to obtain same from prede-

 S. 3398                             4
 
 cessors in title and further provided that the  new  owner  can  provide
 financial  data covering a minimum of six years under his or her contin-
 uous and uninterrupted operation of the building to meet the three  year
 to  three  year comparative test periods herein provided[; and (b) as to
 completed building-wide major capital improvements, for a  finding  that
 such improvements are deemed depreciable under the Internal Revenue Code
 and  that  the  cost  is to be amortized over a twelve-year period for a
 building with thirty-five or fewer housing accommodations, or  a  twelve
 and one-half-year period for a building with more than thirty-five hous-
 ing  accommodations,  for  any  determination  issued by the division of
 housing and community renewal after the effective date of the the  chap-
 ter of the laws of two thousand nineteen that amended this paragraph and
 shall  be  removed  from  the legal regulated rent thirty years from the
 date the increase became effective inclusive of any increases granted by
 the applicable rent guidelines board. Temporary major  capital  improve-
 ment  increases  shall  be collectible prospectively on the first day of
 the first month beginning sixty days from the date of mailing notice  of
 approval  to  the  tenant.  Such notice shall disclose the total monthly
 increase in rent and the first  month  in  which  the  tenant  would  be
 required  to  pay  the  temporary  increase. An approval for a temporary
 major  capital  improvement  increase  shall  not  include   retroactive
 payments. The collection of any increase shall not exceed two percent in
 any year from the effective date of the order granting the increase over
 the  rent  set forth in the schedule of gross rents, with collectability
 of any dollar excess above said sum to  be  spread  forward  in  similar
 increments  and added to the rent as established or set in future years.
 Upon vacancy, the landlord may add any remaining balance of  the  tempo-
 rary  major  capital  improvement  increase to the legal regulated rent.
 Notwithstanding any other provision of the law, for  any  renewal  lease
 commencing  on  or  after  June  14,  2019,  the  collection of any rent
 increases due to any major capital improvements  approved  on  or  after
 June  16,  2012 and before June 16, 2019 shall not exceed two percent in
 any year for any tenant in occupancy  on  the  date  the  major  capital
 improvement  was approved or based upon cash purchase price exclusive of
 interest or service charges. Where an application for a temporary  major
 capital  improvement  increase has been filed, a tenant shall have sixty
 days from the date of mailing of a notice of a proceeding  in  which  to
 answer  or  reply.  The  state division of housing and community renewal
 shall provide any responding tenant with the reasons for the  division's
 approval or denial of such application]. Notwithstanding anything to the
 contrary contained herein, no hardship increase granted pursuant to this
 paragraph  shall, when added to the annual gross rents, as determined by
 the commissioner, exceed the sum of, (i) the annual operating  expenses,
 (ii)  an  allowance for management services as determined by the commis-
 sioner, (iii) actual annual mortgage debt service (interest and  amorti-
 zation)  on  its  indebtedness  to  a  lending institution, an insurance
 company, a retirement fund or welfare fund which is operated  under  the
 supervision of the banking or insurance laws of the state of New York or
 the  United  States, and (iv) eight and one-half percent of that portion
 of the fair market value of the property which exceeds the unpaid  prin-
 cipal  amount  of  the mortgage indebtedness referred to in subparagraph
 (iii) of this paragraph. Fair market value  for  the  purposes  of  this
 paragraph  shall  be  six times the annual gross rent. The collection of
 any increase in the stabilized rent for any apartment pursuant  to  this
 paragraph  shall  not  exceed six percent in any year from the effective
 date of the order granting the increase over the rent set forth  in  the

 S. 3398                             5
 
 schedule  of gross rents, with collectability of any dollar excess above
 said sum to be spread forward in similar increments  and  added  to  the
 stabilized rent as established or set in future years;
   § 4. Subdivision c of section 26-511 of the administrative code of the
 city  of New York is amended by adding three new paragraphs 6-b, 6-c and
 6-d to read as follows:
   (6-B) PROVIDES CRITERIA WHEREBY THE COMMISSIONER MAY ACT UPON APPLICA-
 TION BY OWNERS FOR INCREASES  IN  EXCESS  OF  THE  LEVEL  OF  FAIR  RENT
 INCREASE  ESTABLISHED UNDER THIS LAW PROVIDED, HOWEVER, THAT SUCH CRITE-
 RIA SHALL PROVIDE THAT:
   (I) AS TO COMPLETED BUILDING-WIDE MAJOR CAPITAL  IMPROVEMENTS,  FIRST,
 THAT  A  FINDING THAT SUCH IMPROVEMENTS ARE DEEMED DEPRECIABLE UNDER THE
 INTERNAL REVENUE CODE AND SUCH IMPROVEMENTS ARE REQUIRED FOR THE  OPERA-
 TION OR PRESERVATION OF THE STRUCTURE;
   (II)  HOWEVER,  NO  MAJOR  CAPITAL  IMPROVEMENT  RENT INCREASE WILL BE
 APPROVED BY THE DIVISION OF HOUSING AND  COMMUNITY  RENEWAL  UNLESS  THE
 WORK  PERFORMED  IS AN ENHANCEMENT OR UPGRADE TO A HOUSING ACCOMMODATION
 OR SERVICE THEREIN; OR IS AN ADDITION TO SUCH HOUSING ACCOMMODATION  AND
 OTHERWISE  ELIGIBLE  ACCORDING  TO  THE  PREREQUISITES FOR MAJOR CAPITAL
 IMPROVEMENT RENT INCREASES. ANY REPAIR OR REPLACEMENT INTENDED TO  MAIN-
 TAIN  AN  EXISTING  SERVICE  SHALL  NOT  BE ELIGIBLE FOR A MAJOR CAPITAL
 IMPROVEMENT RENT INCREASE;
   (III) NO APPLICATION FOR A MAJOR CAPITAL IMPROVEMENT RENT INCREASE MAY
 BE APPROVED IF THERE EXIST ANY OUTSTANDING HAZARDOUS VIOLATIONS  AT  THE
 TIME OF THE CONSIDERATION OF SUCH APPLICATION, AS DETERMINED PURSUANT TO
 REGULATIONS  OF  THE  DIVISION  OF  HOUSING AND COMMUNITY RENEWAL OR ANY
 AGENCY ADMINISTERING AND ENFORCING A BUILDING CODE IN  THE  JURISDICTION
 IN  WHICH  THE PROPERTY IS LOCATED, UNLESS IT IS DETERMINED BY THE DIVI-
 SION OF HOUSING AND COMMUNITY RENEWAL THAT SUCH WORK IS ESSENTIAL TO THE
 ALLEVIATION OF THE VIOLATIONS AND SUCH APPROVAL IS CONSISTENT  WITH  THE
 PROVISIONS  OF  THIS  SECTION.  EXCEPT  IN THE CASE OF EMERGENCY OR GOOD
 CAUSE, THE OWNER OF THE PROPERTY SHALL FILE, NOT LESS THAN  THIRTY  DAYS
 BEFORE THE COMMENCEMENT OF THE IMPROVEMENT, WITH THE DIVISION OF HOUSING
 AND  COMMUNITY  RENEWAL A STATEMENT CONTAINING INFORMATION OUTLINING THE
 SCOPE OF WORK, EXPECTED DATE OF COMPLETION FOR SUCH WORK AND AN  AFFIDA-
 VIT SETTING FORTH THE FOLLOWING INFORMATION:
   (A)  EVERY  OWNER OF RECORD AND OWNER OF A SUBSTANTIAL INTEREST IN THE
 PROPERTY OR ENTITY OWNING THE PROPERTY OR  SPONSORING  THE  IMPROVEMENT;
 AND
   (B)  A  STATEMENT THAT NONE OF SUCH PERSONS HAD, WITHIN THE FIVE YEARS
 PRIOR TO THE IMPROVEMENT, BEEN FOUND  TO  HAVE  HARASSED  OR  UNLAWFULLY
 EVICTED  TENANTS BY JUDGMENT OR DETERMINATION OF A COURT OR AGENCY UNDER
 THE PENAL LAW, ANY STATE OR LOCAL LAW REGULATING RENTS OR ANY  STATE  OR
 LOCAL LAW RELATING TO HARASSMENT OF TENANTS OR UNLAWFUL EVICTION.
   UPON  RECEIPT  OF THE SCOPE OF WORK AND AFFIDAVIT PROVIDED FOR HEREIN,
 THE DIVISION OF HOUSING AND COMMUNITY RENEWAL SHALL PROVIDE THE  TENANTS
 IN  OCCUPANCY  IN  SUCH BUILDINGS WITH SUCH INFORMATION. THE DIVISION OF
 HOUSING AND COMMUNITY RENEWAL SHALL, IN ADDITION,  IMPLEMENT  PROCEDURES
 INCLUDING,  BUT  NOT  LIMITED TO, ELICITING TENANT COMMENTS TO DETERMINE
 WHETHER MAJOR CAPITAL IMPROVEMENT REHABILITATION WORK HAS BEEN SATISFAC-
 TORILY COMPLETED. NO  MAJOR  CAPITAL  IMPROVEMENT  RENT  INCREASE  SHALL
 BECOME  EFFECTIVE  UNTIL  ANY DEFECTIVE OR DEFICIENT REHABILITATION WORK
 HAS BEEN CURED.
   (6-C) THE INCREASE PERMITTED FOR SUCH  CAPITAL  IMPROVEMENT  SHALL  BE
 COLLECTED  AS  A MONTHLY SURCHARGE TO THE LEGAL REGULATED RENT. IT SHALL
 BE SEPARATELY DESIGNATED AND BILLED AS SUCH AND SHALL NOT BE  COMPOUNDED

 S. 3398                             6

 BY  ANY  ANNUAL  ADJUSTMENT OF THE LEVEL OF FAIR RENT PROVIDED FOR UNDER
 SUBDIVISION B OF SECTION 26-510 OF THIS CHAPTER. THE SURCHARGE ALLOCABLE
 TO EACH APARTMENT SHALL BE AN AMOUNT EQUAL TO THE COST OF  THE  IMPROVE-
 MENT DIVIDED BY EIGHTY-FOUR DIVIDED BY THE NUMBER OF ROOMS IN THE BUILD-
 ING,  AND  THEN  MULTIPLIED  BY  THE  NUMBER OF ROOMS IN SUCH APARTMENT;
 PROVIDED THAT THE SURCHARGE ALLOCABLE TO ANY APARTMENT, IN ANY ONE  YEAR
 MAY  NOT  EXCEED  AN  AMOUNT  EQUAL  TO  SIX PERCENT OF THE MONTHLY RENT
 COLLECTED BY THE OWNER FOR SUCH APARTMENT AS SET FORTH IN  THE  SCHEDULE
 OF  GROSS  RENTS.  ANY  EXCESS  ABOVE  SAID SIX PERCENT SHALL BE CARRIED
 FORWARD AND COLLECTED IN FUTURE YEARS AS  A  FURTHER  SURCHARGE  NOT  TO
 EXCEED  AN ADDITIONAL SIX PERCENT IN ANY ONE YEAR PERIOD UNTIL THE TOTAL
 SURCHARGE EQUALS THE AMOUNT IT WOULD HAVE BEEN IF THE AFOREMENTIONED SIX
 PERCENT LIMITATION DID NOT APPLY.
   (6-D) COLLECTION OF SURCHARGES IN EXCESS OF THE  LEVEL  OF  FAIR  RENT
 AUTHORIZED  PURSUANT  TO  PARAGRAPHS SIX-B AND SIX-C OF THIS SUBDIVISION
 SHALL CEASE WHEN THE OWNER HAS RECOVERED THE COST OF THE  MAJOR  CAPITAL
 IMPROVEMENT.
   § 5. Paragraph 3 of subdivision d of section 6 of section 4 of chapter
 576  of  the  laws of 1974, constituting the emergency tenant protection
 act of nineteen seventy-four, as amended by section  26  of  part  Q  of
 chapter 39 of the laws of 2019, is amended to read as follows:
   (3)  (I)  COLLECTION  OF SURCHARGES IN ADDITION TO THE LEGAL REGULATED
 RENT AUTHORIZED PURSUANT TO SUBPARAGRAPH (II) OF  THIS  PARAGRAPH  SHALL
 CEASE  WHEN  THE  OWNER  HAS  RECOVERED  THE  COST  OF THE MAJOR CAPITAL
 IMPROVEMENT;
   (II) there has been since January first, nineteen hundred seventy-four
 a major capital improvement  [essential  for  the  preservation,  energy
 efficiency,  functionality,  or  infrastructure  of the entire building,
 improvement of the structure including heating,  windows,  plumbing  and
 roofing,  but  shall  not be for operation costs or unnecessary cosmetic
 improvements. An adjustment under this paragraph shall be in  an  amount
 sufficient  to  amortize  the  cost of the improvements pursuant to this
 paragraph over a twelve-year period for a building with  thirty-five  or
 fewer  housing  accommodations,  or  a  twelve and one-half period for a
 building with more than thirty-five housing accommodations and shall  be
 removed  from  the  legal  regulated rent thirty years from the date the
 increase became effective inclusive of  any  increases  granted  by  the
 applicable  rent  guidelines  board, for any determination issued by the
 division of housing and community renewal after the  effective  date  of
 the chapter of the laws of two thousand nineteen that amended this para-
 graph.  Temporary major capital improvement increases shall be collecta-
 ble prospectively on the first day of the first  month  beginning  sixty
 days  from  the  date of mailing notice of approval to the tenant.  Such
 notice shall disclose the total monthly increase in rent and  the  first
 month  in  which  the  tenant  would  be  required  to pay the temporary
 increase. An approval for a temporary major capital improvement increase
 shall not include retroactive payments. The collection of  any  increase
 shall  not exceed two percent in any year from the effective date of the
 order granting the increase over the rent set forth in the  schedule  of
 gross  rents, with collectability of any dollar excess above said sum to
 be spread forward in similar increments and added to the rent as  estab-
 lished  or  set  in future years. Upon vacancy, the landlord may add any
 remaining balance of the temporary major capital improvement increase to
 the legal regulated rent. Notwithstanding any  other  provision  of  the
 law, the collection of any rent increases for any renewal lease commenc-
 ing  on  or  after  June 14, 2019, due to any major capital improvements

 S. 3398                             7

 approved on or after June 16, 2012 and before June 16,  2019  shall  not
 exceed  two  percent in any year for any tenant in occupancy on the date
 the major capital improvement was approved]; PROVIDED THAT  THE  COMMIS-
 SIONER  FIRST  FINDS THAT SUCH IMPROVEMENTS ARE DEEMED DEPRECIABLE UNDER
 THE  INTERNAL  REVENUE  CODE AND SUCH IMPROVEMENTS ARE REQUIRED  FOR THE
 OPERATION OR PRESERVATION OF THE STRUCTURE.  HOWEVER, NO  MAJOR  CAPITAL
 IMPROVEMENT  RENT  INCREASE  WILL BE APPROVED BY THE DIVISION OF HOUSING
 AND COMMUNITY RENEWAL UNLESS THE WORK PERFORMED  IS  AN  ENHANCEMENT  OR
 UPGRADE TO A HOUSING ACCOMMODATION OR SERVICE THEREIN; OR IS AN ADDITION
 TO  SUCH  HOUSING  ACCOMMODATION AND OTHERWISE ELIGIBLE ACCORDING TO THE
 PREREQUISITES FOR MAJOR CAPITAL IMPROVEMENT RENT INCREASES.  ANY  REPAIR
 OR  REPLACEMENT  INTENDED  TO  MAINTAIN AN EXISTING SERVICE SHALL NOT BE
 ELIGIBLE FOR A MAJOR CAPITAL IMPROVEMENT RENT INCREASE.  NO  APPLICATION
 FOR  A  MAJOR CAPITAL IMPROVEMENT RENT INCREASE MAY BE APPROVED IF THERE
 EXIST ANY OUTSTANDING HAZARDOUS VIOLATIONS AT THE TIME OF THE  CONSIDER-
 ATION  OF SUCH APPLICATION, AS DETERMINED PURSUANT TO REGULATIONS OF THE
 DIVISION OF HOUSING AND COMMUNITY RENEWAL OR ANY AGENCY    ADMINISTERING
 AND  ENFORCING A BUILDING CODE IN THE JURISDICTION IN WHICH THE PROPERTY
 IS LOCATED, UNLESS IT IS DETERMINED  BY  THE  DIVISION  OF  HOUSING  AND
 COMMUNITY  RENEWAL THAT SUCH WORK IS ESSENTIAL TO THE ALLEVIATION OF THE
 VIOLATIONS AND SUCH APPROVAL IS CONSISTENT WITH THE PROVISIONS  OF  THIS
 SECTION. EXCEPT IN THE CASE OF EMERGENCY OR GOOD CAUSE, THE OWNER OF THE
 PROPERTY  SHALL  FILE, NOT LESS THAN THIRTY DAYS BEFORE THE COMMENCEMENT
 OF THE IMPROVEMENT, WITH THE DIVISION OF HOUSING AND COMMUNITY RENEWAL A
 STATEMENT  CONTAINING  INFORMATION OUTLINING THE SCOPE OF WORK, EXPECTED
 DATE OF COMPLETION FOR SUCH WORK AND  AN  AFFIDAVIT  SETTING  FORTH  THE
 FOLLOWING INFORMATION: (A) EVERY OWNER OF RECORD AND OWNER OF A SUBSTAN-
 TIAL  INTEREST IN THE PROPERTY OR ENTITY OWNING THE PROPERTY OR SPONSOR-
 ING THE IMPROVEMENT; AND (B) A STATEMENT THAT NONE OF SUCH PERSONS  HAD,
 WITHIN  THE  FIVE  YEARS  PRIOR  TO  THE IMPROVEMENT, BEEN FOUND TO HAVE
 HARASSED OR UNLAWFULLY EVICTED TENANTS BY JUDGMENT OR DETERMINATION OF A
 COURT OR AGENCY UNDER THE PENAL LAW, ANY STATE OR LOCAL  LAW  REGULATING
 RENTS  OR  ANY  STATE OR LOCAL LAW RELATING TO HARASSMENT  OF TENANTS OR
 UNLAWFUL EVICTION. UPON RECEIPT OF  THE  SCOPE  OF  WORK  AND  AFFIDAVIT
 PROVIDED FOR HEREIN, THE DIVISION OF HOUSING AND COMMUNITY RENEWAL SHALL
 PROVIDE  THE  TENANTS  IN OCCUPANCY IN SUCH BUILDINGS WITH SUCH INFORMA-
 TION. THE DIVISION OF HOUSING AND COMMUNITY RENEWAL SHALL, IN  ADDITION,
 IMPLEMENT  PROCEDURES  INCLUDING,  BUT  NOT LIMITED TO, ELICITING TENANT
 COMMENTS TO DETERMINE WHETHER MAJOR CAPITAL  IMPROVEMENT  REHABILITATION
 WORK  HAS  BEEN  SATISFACTORILY  COMPLETED. NO MAJOR CAPITAL IMPROVEMENT
 RENT INCREASE SHALL BECOME EFFECTIVE UNTIL ANY  DEFECTIVE  OR  DEFICIENT
 REHABILITATION  WORK  HAS  BEEN  CURED.  THE INCREASE PERMITTED FOR SUCH
 CAPITAL IMPROVEMENT SHALL BE COLLECTED AS A  MONTHLY  SURCHARGE  TO  THE
 LEGAL  REGULATED  RENT.  IT SHALL BE SEPARATELY DESIGNATED AND BILLED AS
 SUCH AND SHALL NOT BE COMPOUNDED BY ANY ANNUAL RENT  ADJUSTMENT  AUTHOR-
 IZED BY THE RENT GUIDELINES BOARD UNDER THIS ACT. THE SURCHARGE  ALLOCA-
 BLE  TO  EACH  APARTMENT  SHALL  BE  AN  AMOUNT EQUAL TO THE COST OF THE
 IMPROVEMENT DIVIDED BY EIGHTY-FOUR, DIVIDED BY THE NUMBER  OF  ROOMS  IN
 THE  BUILDING, AND THEN MULTIPLIED BY THE NUMBER OF ROOMS IN SUCH APART-
 MENT;  PROVIDED THAT THE SURCHARGE ALLOCABLE TO ANY APARTMENT IN ANY ONE
 YEAR MAY NOT EXCEED AN AMOUNT EQUAL TO SIX PERCENT OF THE  MONTHLY  RENT
 COLLECTED  BY  THE OWNER FOR SUCH APARTMENT AS SET FORTH IN THE SCHEDULE
 OF GROSS RENTS. ANY EXCESS ABOVE  SAID  SIX  PERCENT  SHALL  BE  CARRIED
 FORWARD  AND  COLLECTED  IN  FUTURE  YEARS AS A FURTHER SURCHARGE NOT TO
 EXCEED AN ADDITIONAL SIX PERCENT IN ANY ONE YEAR PERIOD UNTIL THE  TOTAL

 S. 3398                             8

 SURCHARGE EQUALS THE AMOUNT IT WOULD HAVE BEEN IF THE AFOREMENTIONED SIX
 PERCENT LIMITATION DID NOT APPLY, or
   § 6. The second undesignated paragraph of paragraph (a) of subdivision
 4  of  section  4  of  chapter 274 of the laws of 1946, constituting the
 emergency housing rent control law, as amended by section 25 of  part  B
 of  chapter 97 of the laws of 2011, subparagraph 5 as amended by section
 36 of part Q of chapter 39 of the laws of 2019, subparagraph 7 as  sepa-
 rately  amended  by section 25 of part Q of chapter 39 and section 14 of
 part K of chapter 36 of the laws of 2019 and subparagraph 8  as  amended
 by  section 8 of part K of chapter 36 of the laws of 2019, is amended to
 read as follows:
   No application for adjustment of maximum rent based upon a sales price
 valuation shall be filed by the landlord under this  subparagraph  prior
 to  six  months from the date of such sale of the property. In addition,
 no adjustment ordered by the commission  based  upon  such  sales  price
 valuation  shall  be  effective  prior to one year from the date of such
 sale. Where, however, the assessed valuation of the  land  exceeds  four
 times  the  assessed  valuation of the buildings thereon, the commission
 may determine a valuation of the property equal to five times the equal-
 ized assessed valuation of the  buildings,  for  the  purposes  of  this
 subparagraph. The commission may make a determination that the valuation
 of  the  property  is  an  amount different from such equalized assessed
 valuation where there is a request for  a  reduction  in  such  assessed
 valuation  currently pending; or where there has been a reduction in the
 assessed valuation for the year next preceding the effective date of the
 current assessed valuation in effect at the time of the  filing  of  the
 application.  Net  annual return shall be the amount by which the earned
 income exceeds the operating expenses of the property,  excluding  mort-
 gage  interest  and  amortization, and excluding allowances for obsoles-
 cence and reserves, but including an allowance for depreciation  of  two
 per  centum  of the value of the buildings exclusive of the land, or the
 amount shown for depreciation of the buildings in  the  latest  required
 federal  income  tax return, whichever is lower; provided, however, that
 (1) no allowance for depreciation of the  buildings  shall  be  included
 where  the  buildings have been fully depreciated for federal income tax
 purposes or on the books of the owner; or (2) the landlord who  owns  no
 more  than four rental units within the state has not been fully compen-
 sated by increases in rental income  sufficient  to  offset  unavoidable
 increases  in property taxes, fuel, utilities, insurance and repairs and
 maintenance, excluding mortgage interest and amortization, and excluding
 allowances for  depreciation,  obsolescence  and  reserves,  which  have
 occurred since the federal date determining the maximum rent or the date
 the  property  was acquired by the present owner, whichever is later; or
 (3) the landlord operates a hotel or rooming house or owns a cooperative
 apartment and has not been fully  compensated  by  increases  in  rental
 income  from  the controlled housing accommodations sufficient to offset
 unavoidable increases in property taxes and other costs as are allocable
 to such controlled housing accommodations, including costs of  operation
 of  such  hotel  or  rooming  house, but excluding mortgage interest and
 amortization, and excluding allowances  for  depreciation,  obsolescence
 and reserves, which have occurred since the federal date determining the
 maximum  rent  or  the  date the landlord commenced the operation of the
 property, whichever is later; or (4) the landlord and tenant voluntarily
 enter into a valid written lease in good faith with respect to any hous-
 ing accommodation, which lease provides for an increase in  the  maximum
 rent not in excess of fifteen per centum and for a term of not less than

 S. 3398                             9
 
 two  years,  except  that  where  such lease provides for an increase in
 excess of fifteen  per  centum,  the  increase  shall  be  automatically
 reduced  to fifteen per centum; or (5) the landlord and tenant by mutual
 voluntary  written informed agreement agree to a substantial increase or
 decrease in dwelling space, furniture, furnishings or equipment provided
 in the housing accommodations; provided that an owner shall be  entitled
 to  a  rent  increase where there has been a substantial modification or
 increase of dwelling space, or installation of new equipment or improve-
 ments or new furniture or furnishings provided in or to a tenant's hous-
 ing accommodation. The temporary increase in the maximum  rent  for  the
 affected housing accommodation shall be one-one hundred sixty-eighth, in
 the case of a building with thirty-five or fewer housing accommodations,
 or  one-one  hundred eightieth, in the case of a building with more than
 thirty-five housing accommodations where such increase takes  effect  on
 or  after  the effective date of the chapter of the laws of two thousand
 nineteen that amended  this  subparagraph,  of  the  total  actual  cost
 incurred  by  the  landlord  up to fifteen thousand dollars in providing
 such reasonable and verifiable  modification  or  increase  in  dwelling
 space,  furniture,  furnishings,  or  equipment,  including  the cost of
 installation but excluding finance charges and  any  costs  that  exceed
 reasonable costs established by rules and regulations promulgated by the
 division  of  housing  and community renewal. Such rules and regulations
 shall include:   (i) requirements  for  work  to  be  done  by  licensed
 contractors  and  a prohibition on common ownership between the landlord
 and the contractor or vendor; and (ii)  a  requirement  that  the  owner
 resolve  within  the  dwelling  space all outstanding hazardous or imme-
 diately hazardous violations of the uniform fire prevention and building
 code (Uniform Code), New York city fire code, or New York city  building
 and  housing  maintenance codes, if applicable. Provided further that an
 owner who is entitled to a rent increase pursuant to this  clause  shall
 not  be  entitled to a further rent increase based upon the installation
 of similar equipment, or new furniture or furnishings within the  useful
 life  of  such  new equipment, or new furniture or furnishings. Provided
 further that the recoverable costs incurred by the landlord, pursuant to
 this subparagraph, shall be limited to  an  aggregate  cost  of  fifteen
 thousand  dollars  that  may  be expended on no more than three separate
 individual apartment improvements in a  fifteen  year  period  beginning
 with  the  first individual apartment improvement on or after June four-
 teenth, two thousand nineteen. Provided further that  increases  to  the
 legal  regulated  rent  pursuant to this paragraph shall be removed from
 the legal regulated rent thirty years from the date the increase  became
 effective  inclusive  of  any  increases  granted by the applicable rent
 guidelines board. The owner shall give written notice to the  commission
 of  any  such adjustment pursuant to this clause; or (6) there has been,
 since March first, nineteen hundred fifty, an  increase  in  the  rental
 value  of  the housing accommodations as a result of a substantial reha-
 bilitation of the building or housing accommodation therein which  mate-
 rially  adds  to  the  value of the property or appreciably prolongs its
 life, excluding ordinary repairs, maintenance and replacements;  or  (7)
 (I)  COLLECTION OF SURCHARGES TO THE MAXIMUM RENT AUTHORIZED PURSUANT TO
 ITEM (II) OF THIS CLAUSE SHALL CEASE WHEN THE OWNER  HAS  RECOVERED  THE
 COST  OF  THE MAJOR CAPITAL IMPROVEMENT; (II) there has been since March
 first, nineteen hundred fifty, a major  capital  improvement  [essential
 for  the  preservation, energy efficiency, functionality, or infrastruc-
 ture of the entire building,  improvement  of  the  structure  including
 heating, windows, plumbing and roofing, but shall not be for operational

 S. 3398                            10

 costs  or  unnecessary cosmetic improvements; which for any order of the
 commissioner issued after the effective date of the chapter of the  laws
 of  two  thousand  nineteen that amended this paragraph the cost of such
 improvement  shall  be amortized over a twelve-year period for buildings
 with thirty-five or fewer units or a twelve and one-half year period for
 buildings with more than thirty-five units, and shall  be  removed  from
 the  legal regulated rent thirty years from the date the increase became
 effective inclusive of any increases  granted  by  the  applicable  rent
 guidelines board. Temporary major capital improvement increases shall be
 collectible  prospectively on the first day of the first month beginning
 sixty days from the date of mailing notice of approval  to  the  tenant.
 Such  notice  shall  disclose the total monthly increase in rent and the
 first month in which the tenant would be required to pay  the  temporary
 increase. An approval for a temporary major capital improvement increase
 shall  not  include retroactive payments. The collection of any increase
 shall not exceed two percent in any year from the effective date of  the
 order  granting  the increase over the rent set forth in the schedule of
 gross rents, with collectability of any dollar excess above said sum  to
 be  spread forward in similar increments and added to the rent as estab-
 lished or set in future years.  Upon vacancy, the landlord may  add  any
 remaining balance of the temporary major capital improvement increase to
 the  legal  regulated  rent.  Notwithstanding any other provision of the
 law, for any renewal lease commencing on or after  June  14,  2019,  the
 collection  of  any rent increases due to any major capital improvements
 approved on or after June 16, 2012 and before June 16,  2019  shall  not
 exceed  two  percent in any year for any tenant in occupancy on the date
 the major capital improvement was approved; provided, however, where  an
 application  for a temporary major capital improvement increase has been
 filed, a tenant shall have sixty days from the  date  of  mailing  of  a
 notice  of  a proceeding in which to answer or reply. The state division
 of housing and community renewal shall  provide  any  responding  tenant
 with  the reasons for the division's approval or denial of such applica-
 tion]; PROVIDED THAT THE COMMISSIONER FIRST FINDS THAT SUCH IMPROVEMENTS
 ARE DEEMED DEPRECIABLE UNDER THE INTERNAL REVENUE CODE AND SUCH IMPROVE-
 MENTS ARE REQUIRED FOR THE OPERATION OR PRESERVATION OF  THE  STRUCTURE.
 HOWEVER,  NO MAJOR CAPITAL IMPROVEMENT RENT INCREASE WILL BE APPROVED BY
 THE DIVISION OF HOUSING AND COMMUNITY RENEWAL UNLESS THE WORK  PERFORMED
 IS AN ENHANCEMENT OR UPGRADE TO A HOUSING ACCOMMODATION OR SERVICE THER-
 EIN;  OR  IS  AN  ADDITION  TO  SUCH HOUSING ACCOMMODATION AND OTHERWISE
 ELIGIBLE ACCORDING TO THE PREREQUISITES FOR  MAJOR  CAPITAL  IMPROVEMENT
 RENT  INCREASES.    ANY  REPAIR  OR  REPLACEMENT INTENDED TO MAINTAIN AN
 EXISTING SERVICE SHALL NOT BE ELIGIBLE FOR A MAJOR  CAPITAL  IMPROVEMENT
 RENT  INCREASE.  NO  APPLICATION  FOR  A  MAJOR CAPITAL IMPROVEMENT RENT
 INCREASE MAY BE  APPROVED  IF  THERE  EXIST  ANY  OUTSTANDING  HAZARDOUS
 VIOLATIONS  AT  THE  TIME  OF  THE CONSIDERATION OF SUCH APPLICATION, AS
 DETERMINED PURSUANT TO REGULATIONS OF THE DIVISION OF HOUSING AND COMMU-
 NITY RENEWAL OR ANY AGENCY ADMINISTERING AND ENFORCING A  BUILDING  CODE
 IN  THE  JURISDICTION  IN  WHICH  THE  PROPERTY IS LOCATED, UNLESS IT IS
 DETERMINED BY THE DIVISION OF HOUSING AND COMMUNITY  RENEWAL  THAT  SUCH
 WORK IS ESSENTIAL TO THE ALLEVIATION OF THE VIOLATIONS AND SUCH APPROVAL
 IS CONSISTENT WITH THE PROVISIONS OF THIS SECTION. EXCEPT IN THE CASE OF
 EMERGENCY  OR GOOD CAUSE, THE OWNER OF THE PROPERTY SHALL FILE, NOT LESS
 THAN THIRTY DAYS BEFORE THE COMMENCEMENT OF THE  IMPROVEMENT,  WITH  THE
 DIVISION  OF HOUSING AND COMMUNITY RENEWAL A STATEMENT CONTAINING INFOR-
 MATION OUTLINING THE SCOPE OF WORK, EXPECTED DATE OF COMPLETION FOR SUCH
 WORK AND AN AFFIDAVIT SETTING FORTH THE FOLLOWING INFORMATION: (A) EVERY

 S. 3398                            11
 
 OWNER OF RECORD AND OWNER OF A SUBSTANTIAL INTEREST IN THE  PROPERTY  OR
 ENTITY  OWNING  THE  PROPERTY  OR  SPONSORING THE IMPROVEMENT; AND (B) A
 STATEMENT THAT NONE OF SUCH PERSONS HAD, WITHIN THE FIVE YEARS PRIOR  TO
 THE  IMPROVEMENT,  BEEN  FOUND  TO  HAVE  HARASSED OR UNLAWFULLY EVICTED
 TENANTS BY JUDGMENT OR DETERMINATION OF A  COURT  OR  AGENCY  UNDER  THE
 PENAL LAW, ANY STATE OR LOCAL LAW REGULATING RENTS OR ANY STATE OR LOCAL
 LAW RELATING TO HARASSMENT OF TENANTS OR UNLAWFUL EVICTION. UPON RECEIPT
 OF  THE SCOPE OF WORK AND AFFIDAVIT PROVIDED FOR HEREIN, THE DIVISION OF
 HOUSING AND COMMUNITY RENEWAL SHALL PROVIDE THE TENANTS IN OCCUPANCY  IN
 SUCH BUILDINGS WITH SUCH INFORMATION. THE DIVISION OF HOUSING AND COMMU-
 NITY RENEWAL SHALL, IN ADDITION, IMPLEMENT PROCEDURES INCLUDING, BUT NOT
 LIMITED TO, ELICITING TENANT COMMENTS TO DETERMINE WHETHER MAJOR CAPITAL
 IMPROVEMENT  REHABILITATION  WORK  HAS BEEN SATISFACTORILY COMPLETED. NO
 MAJOR CAPITAL IMPROVEMENT RENT INCREASE SHALL BECOME EFFECTIVE UNTIL ANY
 DEFECTIVE OR DEFICIENT REHABILITATION WORK HAS BEEN CURED. THE  INCREASE
 PERMITTED  FOR  SUCH CAPITAL IMPROVEMENT SHALL BE COLLECTED AS A MONTHLY
 SURCHARGE TO THE MAXIMUM RENT. IT SHALL  BE  SEPARATELY  DESIGNATED  AND
 BILLED  AS  SUCH  AND SHALL NOT BE COMPOUNDED BY ANY OTHER ADJUSTMENT TO
 THE MAXIMUM RENT. THE SURCHARGE ALLOCABLE TO EACH APARTMENT SHALL BE  AN
 AMOUNT  EQUAL  TO  THE  COST  OF THE IMPROVEMENT DIVIDED BY EIGHTY-FOUR,
 DIVIDED BY THE NUMBER OF ROOMS IN THE BUILDING, AND THEN  MULTIPLIED  BY
 THE NUMBER OF ROOMS IN SUCH APARTMENT; PROVIDED THAT THE SURCHARGE ALLO-
 CABLE TO ANY APARTMENT IN ANY ONE YEAR MAY NOT EXCEED AN AMOUNT EQUAL TO
 SIX  PERCENT  OF THE MONTHLY RENT COLLECTED BY THE OWNER FOR SUCH APART-
 MENT AS SET FORTH IN THE SCHEDULE OF GROSS RENTS.  ANY EXCESS ABOVE SAID
 SIX PERCENT SHALL BE CARRIED FORWARD AND COLLECTED IN FUTURE YEARS AS  A
 FURTHER  SURCHARGE  NOT  TO  EXCEED AN ADDITIONAL SIX PERCENT IN ANY ONE
 YEAR PERIOD UNTIL THE TOTAL SURCHARGE EQUALS THE AMOUNT  IT  WOULD  HAVE
 BEEN  IF THE AFOREMENTIONED SIX PERCENT LIMITATION DID NOT APPLY; or (8)
 there has been since March first, nineteen hundred fifty, in  structures
 containing  more  than  four  housing accommodations, other improvements
 made with the express informed consent of the tenants in occupancy of at
 least seventy-five per centum of the housing  accommodations,  provided,
 however,  that  no  adjustment  granted  hereunder  shall exceed two per
 centum unless  the  tenants  have  agreed  to  a  higher  percentage  of
 increase,  as  herein  provided;  (9) there has been, since March first,
 nineteen hundred fifty, a subletting without written  consent  from  the
 landlord  or  an  increase  in the number of adult occupants who are not
 members of the immediate family of the tenant, and the landlord has  not
 been  compensated therefor by adjustment of the maximum rent by lease or
 order of the commission or pursuant to the  federal  act;  or  (10)  the
 presence  of  unique  or peculiar circumstances materially affecting the
 maximum rent has resulted in a maximum rent which is substantially lower
 than the rents generally prevailing in the same area  for  substantially
 similar housing accommodations.
   § 7. Paragraph 5 of subdivision d of section 6 of section 4 of chapter
 576  of  the  laws of 1974, constituting the emergency tenant protection
 act of nineteen seventy-four, as amended by chapter 102 of the  laws  of
 1984, is amended and a new paragraph 6 is added to read as follows:
   (5) as an alternative to the hardship application provided under para-
 graph four of this subdivision, owners of buildings acquired by the same
 owner or a related entity owned by the same principals three years prior
 to  the  date  of application may apply to the division for increases in
 excess of the level of applicable guideline increases established  under
 this  law  based  on  a  finding by the commissioner that such guideline
 increases are not sufficient to enable the owner to maintain  an  annual

 S. 3398                            12
 
 gross  rent  income for such building which exceeds the annual operating
 expenses of such building by a sum equal to at  least  five  percent  of
 such gross rent.  For the purposes of this paragraph, operating expenses
 shall  consist  of  the actual, reasonable, costs of fuel, labor, utili-
 ties, taxes, other than  income  or  corporate  franchise  taxes,  fees,
 permits,  necessary  contracted services and non-capital repairs, insur-
 ance, parts and supplies, management fees and other administrative costs
 and mortgage interest. For the  purposes  of  this  paragraph,  mortgage
 interest  shall  be  deemed  to  mean  interest  on a bona fide mortgage
 including an allocable portion of charges related thereto.  Criteria  to
 be considered in determining a bona fide mortgage other than an institu-
 tional mortgage shall include[;]: condition of the property, location of
 the  property,  the existing mortgage market at the time the mortgage is
 placed, the term of the mortgage, the amortization rate,  the  principal
 amount  of  the mortgage, security and other terms and conditions of the
 mortgage. The commissioner shall set a rental value for any  unit  occu-
 pied  by the owner or a person related to the owner or unoccupied at the
 owner's choice for more than one month at the last regulated  rent  plus
 the minimum number of guidelines increases or, if no such regulated rent
 existed  or  is  known,  the commissioner shall impute a rent consistent
 with other rents in the building. The amount of hardship increase  shall
 be  such  as may be required to maintain the annual gross rent income as
 provided by this paragraph. The division  shall  not  grant  a  hardship
 application  under  this paragraph or paragraph four of this subdivision
 for a period of three years subsequent to granting a  hardship  applica-
 tion  under  the  provisions  of  this  paragraph. The collection of any
 increase in the rent for any  housing  accommodation  pursuant  to  this
 paragraph  shall  not  exceed six percent in any year from the effective
 date of the order granting the increase over the rent set forth  in  the
 schedule  of gross rents, with collectability of any dollar excess above
 said sum to be spread forward in similar increments  and  added  to  the
 rent  as  established  or  set  in future years. No application shall be
 approved unless the owner's equity in such building exceeds five percent
 of: (i) the arms length purchase price of the property; (ii) the cost of
 any capital improvements  for  which  the  owner  has  not  collected  a
 surcharge; (iii) any repayment of principal of any mortgage or loan used
 to  finance the purchase of the property or any capital improvements for
 which the owner has not collected a surcharge; and (iv) any increase  in
 the  equalized  assessed value of the property which occurred subsequent
 to the first valuation of the property after purchase by the owner.  For
 the purposes of this paragraph, owner's equity shall mean the sum of (i)
 the purchase price of the property less the principal of any mortgage or
 loan  used to finance the purchase of the property, (ii) the cost of any
 capital improvement for which the owner has not  collected  a  surcharge
 less the principal of any mortgage or loan used to finance said improve-
 ment,  (iii) any repayment of the principal of any mortgage or loan used
 to finance the purchase of the property or any capital  improvement  for
 which  the owner has not collected a surcharge, and (iv) any increase in
 the equalized assessed value of the property which  occurred  subsequent
 to  the  first valuation of the property after purchase by the owner[.];
 OR
   (6) NOTWITHSTANDING PARAGRAPH THREE OF THIS SUBDIVISION THERE SHALL BE
 NO ADJUSTMENT FOR ANY MAJOR CAPITAL IMPROVEMENT FUNDED IN ANY PART  FROM
 MONEYS  PROVIDED  BY  THE NEW YORK STATE ENERGY RESEARCH AND DEVELOPMENT
 AUTHORITY.

 S. 3398                            13
 
   § 8. Paragraph 1 of subdivision g of section 26-405 of the administra-
 tive code of the city of New York is amended by adding  a  new  subpara-
 graph (p) to read as follows:
   (P)  NOTWITHSTANDING  SUBPARAGRAPH (G) OR (K) OF THIS PARAGRAPH, THERE
 SHALL BE NO ADJUSTMENT FOR ANY MAJOR  CAPITAL  IMPROVEMENT  OR  FOR  ANY
 OTHER  EXPENDITURES  TO  IMPROVE,  RESTORE  OR PRESERVE THE QUALITY OF A
 STRUCTURE IF SUCH MAJOR CAPITAL IMPROVEMENT OR SUCH OTHER EXPENDITURE IS
 FUNDED IN ANY PART FROM MONEYS PROVIDED BY THE  NEW  YORK  STATE  ENERGY
 RESEARCH AND DEVELOPMENT AUTHORITY.
   §  9. This act shall take effect immediately; provided that the amend-
 ments to section 26-405 of the city rent and rehabilitation law made  by
 sections  one,  two and eight of this act shall remain in full force and
 effect only so long as the public emergency requiring the regulation and
 control of residential rents and evictions  continues,  as  provided  in
 subdivision  3  of section 1 of the local emergency housing rent control
 act; and provided that the amendments to  section  26-511  of  the  rent
 stabilization  law of nineteen hundred sixty-nine made by sections three
 and four of this act shall expire on the same date as such  law  expires
 and  shall  not  affect  the  expiration  of  such law as provided under
 section 26-520 of such law, as from time to time amended.